Tri State Pickle Company preferred stock pays a perpetual annual dividend of 2 1/2% of its par value. Par value of TSP preferred stock is $100 per share. If investors' required rate of return on this stock is 15%, what is the value of per share?

Question

Quizplus · Accepted Answer

To calculate the value of the preferred stock, we need to divide the annual dividend by the required rate of return. The annual dividend is 2.5% of $100, which is $2.50 per share. Dividing this by the required rate of return of 15% gives us a value of $16.67 per share. Therefore, the correct answer is C.

Tri State Pickle Company Preferred Stock Pays a Perpetual Annual